Standalone Financial Highlights

Transcription

1 Actions speak Consolidated Financial Bank Reports and Standalone (` In crore) FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Deposits 59,072 74, , , ,643 Advances 53,028 66, , , ,718 Investments$ 24,381 28,659 51,260 45,074 64,562 Total Assets 87, , , , ,933 Net Interest Income 3,720 4,224 6,900 8,126 9,532 Fee Income 853 1,226 1,764 2,121 2,765 Other Non Interest Income ,356 1,288 Operating profit 2,577 2,997 4,041 5,985 7,158 Provisions and Contingencies Tax Provision ,034 1,737 2,134 Net Profit 1,503 1,866 2,090 3,411 4,084 Key Financial Indicators Net Interest Margins 4.9% 4.9% 4.3% 4.5% 4.3% Cost to Income Ratio 50% 52% 58% 48% 47% Return on Average Assets 1.8% 2.0% 1.2% 1.7% 1.7% Fee / NII Plus other Income 16.7% 19.6% 18.5% 18.3% 20.4% NII / NII Plus other Income 72.7% 67.6% 72.5% 70.0% 70.2% Capital Adequacy Ratio 18.8% 17.2% 16.3% 16.8% 18.2% Tier I 17.8% 16.2% 15.3% 15.9% 17.6% Gross NPA Ratio 2.0% 1.9% 2.4% 2.6% 2.2% Net NPA Ratio 1.1% 0.9% 1.1% 1.3% 1.0% $ Pursuant to RBI guidelines,the Bank has included its deposits placed with NABARD,SIDBI and NHB on account of shortfall in lending to priority sector under Other Assets,earlier included under Investments. Annual Report / 27

2 Independent Auditor s Report To the Members of Kotak Mahindra Bank Limited Report on the Standalone Financial 1. We have audited the accompanying standalone financial statements of Kotak Mahindra Bank Limited (the Bank ), which comprise the Balance Sheet as at March 31, 2018, the Profit and Loss Account and the Cash Flow statement for the year then ended, and a summary of significant accounting policies and notes to the financial statements. Management s Responsibility for the Standalone Financial 2. The Bank s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (the Act ) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Bank in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949, accounting principles generally accepted in India, including the Companies (Accounting Standards) Rules, 2006 (as amended) specified under section 133 of the Act, read with the Companies (Accounts) Rules, 2014 in so far as they apply to the Bank and the guidelines issued by the Reserve Bank of India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Bank and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies, making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial control, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditor s Responsibility 3. Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India, as specified under section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Bank s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Bank s Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements. Opinion 5. In our opinion and to the best of our information and according to the explanations given to us, the standalone financial statements together with the notes thereon give the information required by the Banking Regulation Act, 1949 as well as the Companies Act, 2013, in the manner so required for the banking companies and give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the Bank as at March 31, 2018, its profit and its cash flows for the year ended on that date. Report on Other Legal and Regulatory Requirements 6. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949 read with the Companies (Accounting Standards) Rules, 2006 (as amended) specified under section 133 of the Act, read with the Companies (Accounts) Rules, As required sub section (3) of section 30 of the Banking Regulation Act, 1949 and the appointment letter dated June 22, 2017, we report that: (a) (b) (c) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit and have found them to be satisfactory; The transactions of the Bank, which have come to our notice, have been within the powers of the Bank; and The financial accounting systems of the Bank are centralised and therefore, accounting returns for the purpose of preparing

3 Actions speak Consolidated Financial Bank Reports and Independent Auditor s Report financial statements are not required to be submitted by the branches; we have visited 134 branches for the purpose of our audit. 8. Further, as required by section 143(3) of the Companies Act, 2013, we further report that: (a) (b) (c) (d) (e) (f) (g) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; In our opinion, proper books of account as required by law have been kept by the Bank so far as it appears from our examination of those books; The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this Report are in agreement with the books of account; In our opinion, the aforesaid standalone financial statements comply with the Companies (Accounting Standards) Rules, 2006 (as amended) specified under section 133 of the Act, read with the Companies (Accounts) Rules, 2014; On the basis of written representations received from the directors as on March 31, 2018 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2018 from being appointed as a director in terms of Section 164 (2) of the Act; With respect to the adequacy of the internal financial controls over financial reporting of the Bank and the operating effectiveness of such controls, refer to our separate Report in Annexure 1 to this report; and With respect to the other matters to be included in the Auditor s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us: i. The Bank has disclosed the impact of pending litigations on its financial position in its financial statements Refer Schedule 12.I, Schedule 17 - Note 13, and Schedule 18B - Note 15 to the financial statements; ii. iii. The Bank has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts Refer Schedule 17-Note 13 and Schedule 18B - Note 11 to the financial statements; and There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Bank. For S.R. Batliboi & Co. LLP Chartered Accountants ICAI Firm Registration Number: E/E per Viren H. Mehta Partner Membership Number: Place of Signature: Mumbai Date: 30 April 2018 Annual Report / 187

4 ANNEXURE 1 TO THE INDEPENDENT AUDITOR S REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF KOTAK MAHINDRA BANK LIMITED Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (the Act ) To the Members of Kotak Mahindra Bank Limited We have audited the internal financial controls over financial reporting of Kotak Mahindra Bank Limited (the Bank ) as of March 31, 2018 in conjunction with our audit of the standalone financial statements of the Bank for the year ended on that date. Management s Responsibility for Internal Financial Controls The Bank s Management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Bank considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to the Bank s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, Auditor s Responsibility Our responsibility is to express an opinion on the Bank's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the Guidance Note ) and the Standards on Auditing as specified under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the internal financial controls system over financial reporting. Meaning of Internal Financial Controls Over Financial Reporting A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Inherent Limitations of Internal Financial Controls Over Financial Reporting Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

5 Actions speak Consolidated Financial Bank Reports and Independent Auditor s Report Opinion In our opinion, the Bank has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2018, based on the internal control over financial reporting criteria established by the Bank considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. For S.R. Batliboi & Co. LLP Chartered Accountants ICAI Firm Registration Number: E/E per Viren H. Mehta Partner Membership Number: Place of Signature: Mumbai Date: 30 April 2018 Annual Report / 189

6 Balance Sheet as at 31 st March, 2018 CAPITAL AND LIABILITIES Schedule 31 st March, 2018 (` in thousands) 31 st March, 2017 Capital 1 9,528,243 9,204,489 Employee's Stock Options (Grants) Outstanding 21,680 18,676 Reserves and Surplus 2 365,288, ,956,201 Deposits 3 1,926,432,709 1,574,258,599 Borrowings 4 251,541, ,954,809 Other Liabilities and Provisions 5 96,521,497 84,506,802 TOTAL 2,649,333,976 2,145,899,576 ASSETS Cash and Balances with Reserve Bank of India 6 89,085,076 74,924,258 Balances with Banks and Money at Call and Short Notice 7 107,116, ,795,841 Investments 8 645,623, ,741,873 Advances 9 1,697,179,249 1,360,821,288 Fixed Assets 10 15,271,602 15,376,279 Other Assets 11 95,058,577 93,240,037 TOTAL 2,649,333,976 2,145,899,576 Contingent Liabilities 12 2,051,048,385 1,930,675,359 Bills for Collection 242,553, ,182,634 Significant accounting policies and notes to accounts forming part of financial statements 17 & 18 The schedules referred to above form an integral part of this Balance Sheet. The Balance Sheet has been prepared in conformity with Form A of the Third Schedule to the Banking Regulation Act, As per our report of even date attached. For S.R. Batliboi & Co. LLP Chartered Accountants Firm Registration No E/E For and on behalf of the Board of Directors Dr. Shankar Acharya Chairman Uday Kotak Executive Vice Chairman and Managing Director per Viren H. Mehta Partner Membership No Mumbai 30 th April, 2018 Dipak Gupta Joint Managing Director Jaimin Bhatt President and Group Chief Financial Officer Prakash Apte Director Bina Chandarana Company Secretary

7 Actions speak Consolidated Financial Bank Reports and Balance Sheet Profit and Loss Account Profit and Loss Account for the year ended 31 st March, 2018 I. INCOME II. III. IV. Schedule For the year ended 31 st March, 2018 (` in thousands) For the year ended 31 st March, 2017 Interest earned ,484, ,989,329 Other Income 14 40,522,082 34,771,584 TOTAL 238,007, ,760,913 EXPENDITURE Interest Expended ,168,077 95,727,841 Operating Expenses 16 64,257,223 56,184,953 Provisions and Contingencies (Refer Note 11 -Schedule 18 B) 30,738,704 25,733,141 TOTAL 197,164, ,645,935 PROFIT Net Profit for the year (I - II) 40,843,034 34,114,978 Add: Balance in Profit and Loss Account brought forward from 107,562,902 82,141,193 previous year TOTAL 148,405, ,256,171 APPROPRIATIONS Transfer to Statutory Reserve 10,210,800 8,528,800 Transfer to Capital Reserve 240, ,500 Transfer to Special Reserve u/s 36(1)(viii) of Income Tax Act, , ,000 Transfer from Investment Reserve Account (Refer Note 33 - Schedule 18 A) - (484,902) Dividend 1,142, Corporate Dividend Tax 217,027 (6,831) Balance carried over to Balance Sheet 136,045, ,562,902 TOTAL 148,405, ,256,171 V. EARNINGS PER SHARE (Face value of ` 5/-) Basic (`) Diluted (`) (Refer Note 1 - Schedule 18 B) Significant Accounting Policies and Notes to accounts forming part of financial statements 17 & 18 The schedules referred to above form an integral part of this Profit and Loss Account. The Profit and Loss Account has been prepared in conformity with Form B of the Third Schedule to the Banking Regulation Act, As per our report of even date attached. For S.R. Batliboi & Co. LLP Chartered Accountants Firm Registration No E/E For and on behalf of the Board of Directors Dr. Shankar Acharya Chairman Uday Kotak Executive Vice Chairman and Managing Director per Viren H. Mehta Partner Membership No Mumbai 30 th April, 2018 Dipak Gupta Joint Managing Director Jaimin Bhatt President and Group Chief Financial Officer Prakash Apte Director Bina Chandarana Company Secretary Annual Report / 191

8 Cash Flow Statement for the year ended 31 st March, 2018 CASH FLOW FROM OPERATING ACTIVITIES Year Ended 31 st March, 2018 (` in thousands) Year Ended 31 st March, 2017 Profit after tax 40,843,034 34,114,978 Add: Provision for tax 21,339,169 17,365,692 Net Profit before taxes 62,182,203 51,480,670 Adjustments for:- Employee Stock Options Expense 17,470 15,027 Depreciation on Bank's Property 3,026,901 2,906,622 Diminution in the value of Investments written off 1,969,098 1,392,407 Dividend from Subsidiaries/Joint Ventures (76,070) (34,239) Amortization of Premium on HTM Investments 2,796,655 2,267,493 Provision for Non Performing Assets, Standard Assets and Other Provisions 7,430,437 6,975,042 Profit on sale of Fixed Assets (457,390) (122,582) Adjustments for :- (Increase)/Decrease in Investments (other than Subsidiaries, Joint Ventures and Other HTM Investments) 76,889,304 64,880,440 (177,283,772) 84,947,350 Increase in Advances (342,606,061) (180,312,456) (Increase)/Decrease in Other Assets (1,949,097) 3,315,829 Increase in Deposits 352,174, ,828,375 Increase/ (Decrease) in Other Liabilities and Provisions 10,937,267 (2,223,810) (158,727,553) 93,555,288 Direct Taxes Paid (20,910,902) (14,316,516) NET CASH FLOW FROM OPERATING ACTIVITIES (A) (102,749,151) 144,119,212 CASH FLOW FROM/(USED IN) INVESTING ACTIVITIES Purchase of Fixed Assets (3,431,258) (3,200,324) Sale of Fixed Assets 563, ,604 Investments in Subsidiaries/Joint Ventures (16,048,267) (889,000) Investments in HTM securities (6,315,309) (25,857,921) Dividend from Subsidiaries/Joint Ventures 76,070 34,239 NET CASH FLOW USED IN INVESTING ACTIVITIES (B) (25,154,958) (29,718,402) CASH FLOW FROM/ (USED IN) FINANCING ACTIVITIES Decrease in Subordinated Debt (2,728,530) (5,709,856) Increase in Refinance 13,788,283 9,425,463 Increase/(Decrease) in Borrowings [other than Refinance and Sub-ordinated debt] 29,526,969 (2,514,180) Money received on exercise of Stock Options/Issue of Shares 59,531,804 2,463,731 Share Issue Expenses (387,125) (2,200) Dividend paid including Corporate Dividend Tax (1,359,168) (1,097,784)

9 Actions speak Cash Flow Statement for the year ended 31 st March, 2018 Consolidated Financial Bank Reports and Cash Flow Statement Year Ended 31 st March, 2018 (` in thousands) Year Ended 31 st March, 2017 NET CASH FLOW FROM/(USED IN) FINANCING ACTIVITIES (C) 98,372,233 2,565,174 Increase/(Decrease) in Foreign Currency Translation Reserve (D) 12,857 (43,039) NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (A + B + C + D) (29,519,019) 116,922,945 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR (Refer Note below) CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR (Refer Note below) Note: 225,720, ,797, ,201, ,720,099 Balance with Banks in India in Fixed Deposit (As per Sch 7 I (i) (b)) 62,425 5,073,425 Balance with Banks in India in Current Account (As per Sch 7 I (i) (a)) 3,338,130 1,629,708 Money at Call and Short Notice in India (as per Sch 7 I (ii)) 85,471, ,799,693 Cash in hand (including foreign currency notes) (As per Sch 6 I.) 12,049,839 9,969,738 Balance with RBI in Current Accounts (As per Sch 6 II.) 77,035,237 64,954,520 Balance with banks Outside India: (i) In Current Account (As per Sch 7 II (i)) 6,186,757 8,644,515 (ii) In other Deposit Accounts (As per Sch 7 II (ii)) 12,057, ,500 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 196,201, ,720,099 As per our report of even date attached. For S.R. Batliboi & Co. LLP Chartered Accountants Firm Registration No E/E For and on behalf of the Board of Directors Dr. Shankar Acharya Chairman Uday Kotak Executive Vice Chairman and Managing Director per Viren H. Mehta Partner Membership No Mumbai 30 th April, 2018 Dipak Gupta Joint Managing Director Jaimin Bhatt President and Group Chief Financial Officer Prakash Apte Director Bina Chandarana Company Secretary Annual Report / 193

10 Schedules Forming part of the Balance Sheet as at 31 st March, 2018 SCHEDULE 1 - CAPITAL Authorised Capital 3,000,000,000 Equity Shares of ` 5/- each (31 st March, 2017: 3,000,000,000 Equity Shares of ` 5 each) Issued, Subscribed and Paid-up Capital 1,905,648,506 Equity Shares of ` 5/- each (31 st March, 2017: 1,840,897, st March, 2018 (` in thousands) 31 st March, ,000,000 15,000,000 Equity Shares of ` 5 each) fully paid-up 9,528,243 9,204,489 TOTAL 9,528,243 9,204,489 SCHEDULE 2 - RESERVES AND SURPLUS I. Statutory Reserve II. III. IV. 31 st March, 2018 (` in thousands) 31 st March, 2017 Opening Balance 44,883,583 36,354,783 Add: Transfer from Profit and Loss Account 10,210,800 8,528,800 TOTAL 55,094,383 44,883,583 Capital Reserve Opening Balance 1,823,986 1,718,486 Add: Transfer from Profit and Loss Account 240, ,500 TOTAL 2,063,986 1,823,986 General Reserve Opening Balance 6,404,249 6,404,249 Add: Transfer from Profit and Loss Account - - TOTAL 6,404,249 6,404,249 Investment Reserve Account Opening Balance - 484,902 Add: Transfer from/(to) Profit and Loss Account (Refer Note 33 - Schedule 18 A) - (484,902) TOTAL - - V. Special Reserve Account u/s 36(1)(viii) of Income Tax Act, 1961 VI. VII. Opening Balance 3,992,000 3,442,000 Add: Transfer from Profit and Loss Account 550, ,000 TOTAL 4,542,000 3,992,000 Securities Premium Account Opening Balance 101,107,974 98,648,532 Add: Received during the year 59,222,515 2,461,642 Less: Share Issue Expenses 387,125 2,200 TOTAL 159,943, ,107,974 Amalgamation Reserve Opening Balance 1,224,046 1,224,046 Add: Additions - - TOTAL 1,224,046 1,224,046

11 Actions speak Consolidated Financial Bank Reports and Schedules VIII. IX. Investment Allowance (Utilised) Reserve 31 st March, 2018 (` in thousands) 31 st March, 2017 Opening Balance Add: Additions - - TOTAL Foreign Currency Translation Reserve Opening Balance (43,039) (43,039) Add: Current Year 12,859 - TOTAL (30,180) (43,039) X. Balance in the Profit and Loss Account Balance in the Profit and Loss Account 136,045, ,562,902 TOTAL 136,045, ,562,902 TOTAL (I to X) 365,288, ,956,201 SCHEDULE 3 - DEPOSITS A. I. Demand Deposits 31 st March, 2018 (` in thousands) 31 st March, 2017 i. From Banks 4,031,444 3,839,881 ii. From Others 318,426, ,767,950 TOTAL 322,457, ,607,831 II. Savings Bank Deposits 655,292, ,039,313 III. Term Deposits i. From Banks 13,446,945 5,776,790 ii. From Others 935,236, ,834,665 TOTAL 948,682, ,611,455 TOTAL DEPOSITS ( I to III) 1,926,432,709 1,574,258,599 B. I. Deposits of Branches in India 1,925,907,939 1,572,729,858 II. Deposits of Branches Outside India 524,770 1,528,741 TOTAL DEPOSITS 1,926,432,709 1,574,258,599 SCHEDULE 4 - BORROWINGS I. Borrowings in India II. 31 st March, 2018 (` in thousands) 31 st March, 2017 (i) Reserve Bank of India 13,750,000 5,000,000 (ii) Other Banks 36,526,105 51,000,202 (iii) Other Institutions and Agencies (Refer Note 13 - Schedule 18 B) 120,407,480 98,336,152 TOTAL 170,683, ,336,354 Borrowings outside India Banks & Other Institutions (Refer Note 13 - Schedule 18 B) 80,857,946 56,618,455 TOTAL 80,857,946 56,618,455 TOTAL BORROWINGS (I + II) 251,541, ,954,809 Secured Borrowings other than CBLO and Repo Borrowings included in I above - - Tier II Bonds included in I (iii) above 7,018,000 9,948,000 Tier II Bonds included in II above 2,251,008 2,122,821 Annual Report / 195

12 SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS 31 st March, 2018 (` in thousands) 31 st March, 2017 I. Bills Payable 14,851,284 13,147,598 II. Interest Accrued 8,709,983 9,129,362 III. Provision for tax (net of advance tax and tax deducted at source) 109, ,044 IV. Standard Asset provision (Refer Note 20 - Schedule 18 A) 7,609,142 6,485,603 V. Others (including provisions) 65,241,954 55,530,195 TOTAL 96,521,497 84,506,802 SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA 31 st March, 2018 (` in thousands) 31 st March, 2017 I. Cash in hand (including foreign currency notes) 12,049,839 9,969,738 II. Balances with RBI in current account 77,035,237 64,954,520 TOTAL 89,085,076 74,924,258 SCHEDULE 7 - BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE I. In India II. (i) Balances with Banks 31 st March, 2018 (` in thousands) 31 st March, 2017 (a) In Current Accounts 3,338,130 1,629,708 (b) In Other Deposit Accounts 62,425 5,073,425 TOTAL 3,400,555 6,703,133 (ii) Money at Call and Short Notice (a) With Banks 51,921,317 19,299,693 (b) With Other Agencies 33,550, ,500,000 TOTAL 85,471, ,799,693 TOTAL (i + ii) 88,871, ,502,826 Outside India (i) In Current Accounts 6,186,757 8,644,515 (ii) In Other Deposit Accounts 12,057, ,500 TOTAL 18,244,132 9,293,015 TOTAL (I + II) 107,116, ,795,841

13 Actions speak Consolidated Financial Bank Reports and Schedules SCHEDULE 8 - INVESTMENTS I. Investments in India in II. 31 st March, 2018 (` in thousands) 31 st March, 2017 i. Government Securities 516,280, ,575,389 ii. Other approved Securities - - iii. Shares 12,449,591 7,027,118 iv. Debentures and Bonds 59,750,322 48,462,884 v. Subsidiaries and Joint Ventures 24,430,166 8,359,096 vi. Others [Units, Certificate of Deposits (CD), Commercial Paper (CP), Security Receipts,Pass Through Certificates(PTC)] 31,168,183 24,753,520 TOTAL 644,078, ,178,007 Investments Outside India in i. Government Securities 1,296, ,513 ii. Shares 16,523 8,744 iii. Subsidiaries and Joint Ventures 231, ,609 TOTAL 1,545, ,866 TOTAL INVESTMENTS (I + II) 645,623, ,741,873 SCHEDULE 9 - ADVANCES 31 st March, 2018 (` in thousands) 31 st March, 2017 A. (i) Bills purchased and discounted # 71,057,817 57,835,681 (ii) Cash Credits, Overdrafts and loans repayable on demand 496,101, ,795,477 (iii) Term Loans 1,130,019, ,190,130 TOTAL 1,697,179,249 1,360,821,288 # Bills purchased and discounted is net of Bills Rediscounted ` 1, crore (Previous Year ` 1, crore) B. (i) Secured by tangible assets * 1,286,295,458 1,052,619,846 (ii) Covered by Bank/Government guarantees 19,352,191 - (iii) Unsecured 391,531, ,201,442 TOTAL 1,697,179,249 1,360,821,288 * including advances secured against book debts C. I Advances in India II (i) Priority Sector 592,840, ,109,122 (ii) Public Sector 21,786,687 2,796,032 (iii) Banks 482,031 - (iv) Others 1,054,739, ,288,295 Advances outside India (i) Due from banks - - (ii) Due from others a) Bills purchased and discounted - - b) Syndicated and term loans 27,330,829 12,627,839 c) Others - - TOTAL 1,697,179,249 1,360,821,288 Annual Report / 197

14 SCHEDULE 10 - FIXED ASSETS A. Premises (Including Land) Gross Block 31 st March, 2018 (` in thousands) 31 st March, 2017 At cost on 31 st March of the preceding year 10,733,251 10,740,010 Additions during the year 371 3,588 Less: Deductions during the year 61,771 10,347 TOTAL 10,671,851 10,733,251 Depreciation 31 st March of the preceding year 1,421,080 1,247,974 Add: Charge for the year 176, ,066 Less: Deductions during the year 23,821 3,960 Depreciation to date 1,573,804 1,421,080 Net Block 9,098,047 9,312,171 B. Other Fixed Assets (including furniture and fixtures) Gross Block At cost on 31 st March of the preceding year 24,653,555 22,277,899 Additions during the year 3,028,269 2,835,413 Less: Deductions during the year 2,613, ,757 TOTAL 25,067,950 24,653,555 Depreciation 31 st March of the preceding year 18,746,431 16,410,997 Add: Charge for the year 2,850,356 2,729,556 Less: Deductions during the year 2,545, ,122 Depreciation to date 19,051,379 18,746,431 Net Block (Refer Note 6 - Schedule 18 B) 6,016,571 5,907,124 C. Leased Fixed Assets Gross Block At cost on 31 st March of the preceding year 1,540,585 1,540,585 Additions during the year - - Less: Deductions during the year - - TOTAL 1,540,585 1,540,585 Depreciation 31 st March of the preceding year 1,383,601 1,383,601 Add: Charge for the year - - Less: Deductions during the year - - Depreciation to date 1,383,601 1,383,601 Net Block 156, ,984 TOTAL (A) + (B) + (C) 15,271,602 15,376,279

15 Actions speak Consolidated Financial Bank Reports and Schedules SCHEDULE 11 - OTHER ASSETS 31 st March, 2018 (` in thousands) 31 st March, 2017 I. Interest accrued 20,659,572 18,901,374 II. Advance tax (net of provision for tax) - - III. Stationery and Stamps 15,300 13,802 IV. Cheques in course of collection 241, ,132 V. Non banking assets acquired in satisfaction of claims 67,824 67,824 VI. Others (Refer Note 4 - Schedule 18 B)* 74,074,453 73,795,905 TOTAL 95,058,577 93,240,037 * Includes Deferred Tax Asset ` crore (Previous year ` crore) SCHEDULE 12 - CONTINGENT LIABILITIES 31 st March, 2018 (` in thousands) 31 st March, 2017 I. Claims not acknowledged as debts 13,213,254 12,382,279 II. Liability on account of Outstanding Forward Exchange Contracts 1,240,928,580 1,164,196,265 III. Guarantees on behalf of Constituents 272,736, ,803,125 IV. Acceptances, Endorsements and other obligations 135,250, ,154,901 V. Other Items for which the Bank is contingently liable : a. Liability in respect of interest rate and currency swaps and forward rate agreements 350,225, ,850,914 b. Liability in respect of Options Contracts 35,352,504 51,839,782 c. Capital commitments not provided 1,687,900 1,089,000 d. Unclaimed Customer balances transferred to RBI DEAF Scheme 1,653,253 1,359,093 TOTAL 2,051,048,385 1,930,675,359 SCHEDULE 13 - INTEREST EARNED For the year ended 31 st March, 2018 (` in thousands) For the year ended 31 st March, 2017 I. Interest/discount on Advances/Bills 147,279, ,021,048 II. Income on Investments 39,330,039 36,810,378 III. Interest on balances with RBI and other inter-bank funds 7,552,917 2,183,220 IV. Others 3,322,457 3,974,683 TOTAL 197,484, ,989,329 Annual Report / 199

16 SCHEDULE 14 - OTHER INCOME For the year ended 31 st March, 2018 (` in thousands) For the year ended 31 st March, 2017 I. Commission, exchange and brokerage 27,645,399 21,206,677 II. Profit/(Loss) on sale of Investments (net) 2,123,029 4,415,866 III. Profit/(Loss) on sale of building and other assets (net) 457, ,582 IV. Profit on exchange transactions (net) (including derivatives) 6,039,115 5,283,692 V. Income earned from Subsidiaries/Joint Ventures 896, ,819 VI. Profit on recoveries of non-performing assets acquired 2,131,131 2,295,560 VII. Miscellaneous Income 1,229, ,388 TOTAL 40,522,082 34,771,584 SCHEDULE 15 - INTEREST EXPENDED For the year ended 31 st March, 2018 (` in thousands) For the year ended 31 st March, 2017 I. Interest on Deposits 89,375,012 82,360,074 II. Interest on RBI / Inter-Bank Borrowings 5,669,773 5,583,625 III. Others (Refer Note 13(c) - Schedule 18 B) 7,123,292 7,784,142 TOTAL 102,168,077 95,727,841 SCHEDULE 16 - OPERATING EXPENSES For the year ended 31 st March, 2018 (` in thousands) For the year ended 31 st March, 2017 I. Payments to and provision for employees (Refer Note 10 - Schedule 18 B) 29,502,348 27,685,293 II. Rent, taxes and lighting (Refer Note 3 - Schedule 18 B) 5,784,842 5,504,222 III. Printing and Stationery 870, ,547 IV. Advertisement, Publicity and Promotion 1,105, ,769 V. Depreciation on Bank's property 3,026,901 2,906,622 VI. Directors' fees, allowances and expenses 16,603 15,100 VII. Auditors' fees and expenses (Refer Note 14 - Schedule 18 B) 21,127 19,471 VIII. Law Charges 342, ,125 IX. Postage, telephone etc. 1,388,870 1,228,270 X. Repairs and maintenance 3,828,591 3,396,766 XI. Insurance 1,634,727 1,415,299 XII. Travel and Conveyance 1,028, ,180 XIII. Professional Charges 6,231,326 4,201,433 XIV. Brokerage 2,201,170 1,682,928 XV. Stamping Expenses 103, ,109 XVI. Other Expenditure (Refer Note 12 - Schedule 18 B) 8,337,618 5,958,130 65,424,384 57,091,264 Less: Reimbursement of Costs from Group Companies 1,167, ,311 TOTAL 64,257,223 56,184,953

17 Actions speak Consolidated Financial Bank Reports and Schedules SCHEDULE 17 SIGNIFICANT ACCOUNTING POLICIES A BACKGROUND In February 2003, Kotak Mahindra Finance Limited was given a license to carry out banking business by the Reserve Bank of India ( RBI ). It was the first Non Banking Finance Company (NBFC) in India to be converted into a Bank. Kotak Mahindra Bank Limited ( Kotak Mahindra Bank, Kotak or the Bank ) provides a full suite of banking services to its customers encompassing Retail Banking, Treasury and Corporate Banking in India and also has a representative office in Dubai. The Bank set up and commenced operations in May 2016, at its International Financial Services Center Banking Unit (IBU) in Gujarat International Finance Tec (GIFT) City, Gujarat which is India s first global financial and IT services hub designed on the lines of global financial centres. B BASIS OF PREPARATION The financial statements have been prepared in accordance with statutory requirements prescribed under the Banking Regulation Act, The accounting and reporting policies of Kotak Mahindra Bank used in the preparation of these financial statements is the accrual method of accounting and historical cost convention and it conforms with Generally Accepted Accounting Principles in India ( Indian GAAP ), the Accounting Standards specified under section 133 and the relevant provision of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 and other relevant provisions of the Companies Act, 2013 ( the 2013 act ) and the Companies (Accounting Standards) Amendment Rules 2016 in so far as they apply to banks and the guidelines issued by RBI. Use of estimates The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Bank s Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. Any revision to the accounting estimates is recognised prospectively in the current and future periods. C. SIGNIFICANT ACCOUNTING POLICIES 1 Investments Classification: In accordance with the RBI guidelines on investment classification and valuation, investments are classified on the date of purchase into Held for Trading ( HFT ), Available for Sale ( AFS ) and Held to Maturity ( HTM ) categories (hereinafter called categories ). Subsequent shifting amongst the categories is done in accordance with the RBI guidelines at the lower of the acquisition cost or carrying value and market value on the date of the transfer, and depreciation, if any, on such transfer is fully provided. Under each of these categories, investments are further classified under six groups (hereinafter called groups ) - Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries/Joint Ventures and Other Investments for the purposes of disclosure in the Balance Sheet. The Bank follows Settlement Date accounting for recording purchase and sale transactions in securities, except in the case of equity shares where Trade Date accounting is followed. Basis of classification: Investments that are held principally for resale within 90 days from the date of purchase are classified under HFT category. As per the RBI guidelines, HFT securities, which remain unsold for a period of 90 days are reclassified as AFS securities as on that date. Investments which the Bank intends to hold till maturity are classified as HTM securities. The Bank has classified investments in subsidiaries, joint ventures and associates under HTM category. Investments which are not classified in either of the above two categories are classified under AFS category. Acquisition Cost: The cost of investments is determined on weighted average basis. Broken period interest on debt instruments and government securities are considered as a revenue item. The transaction costs including brokerage, commission, etc. paid at the time of acquisition of investments is recognised in Profit and Loss Account. Disposal of investments: Investments classified as HFT or AFS - Profit or loss on sale or redemption is recognised in the Profit and Loss Account. Investments classified as HTM - Profit on sale or redemption of investments is recognised in the Profit and Loss Account and is appropriated to Capital Reserve after adjustments for tax and transfer to Statutory Reserve. Loss on sale or redemption is recognised in the Profit and Loss Account. Annual Report / 201

18 Valuation: The valuation of investments is performed in accordance with the RBI guidelines as follows: a) Investments classified as HTM These are carried at their acquisition cost. Any premium on acquisition of debt instruments / government securities is amortised over the balance maturity of the security on a straight line basis. Any diminution, other than temporary, in the value of such securities is provided. b) Investments classified as HFT or AFS Investments in these categories are marked to market and the net depreciation, if any, within each group is recognised in the Profit and Loss Account. Net appreciation, if any, is ignored. Further, provision other than temporary diminution is made at individual security level. Except in cases where provision other than temporary diminution is made, the book value of the individual securities is not changed as a result of periodic valuations. c) The market or fair value of quoted investments included in the AFS and HFT categories is measured with respect to the market price of the scrip as available from the trades or quotes on the stock exchanges, SGL account transactions, price list of RBI or prices declared on Fixed Income Money Market and Derivatives Association of India ( FIMMDA ) website by Financial Benchmark India Private Limited (FBIL) as at the year end. d) Treasury Bills, Exchange Funded Bills, Commercial Paper and Certificate of Deposits being discounted instruments, are valued at carrying cost. e) Units of mutual funds are valued at the latest net asset value declared by the mutual fund. f) Investments in subsidiaries / joint ventures (as defined by RBI) are categorised as HTM and assessed for impairment to determine other than temporary diminution, if any, in accordance with RBI guidelines. g) Market value of investments where current quotations are not available, are determined as per the norms prescribed by the RBI as under: In case of unquoted bonds, debentures and preference shares where interest /dividend is received regularly (i.e. not overdue beyond 90 days), the market price is derived based on the Yield to Maturity for Government Securities as published by FIMMDA / FBIL and suitably marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up for each category and credit rating along with residual maturity issued by FIMMDA/FBIL is adopted for this purpose; In case of bonds and debentures (including Pass Through Certificates) where interest is not received regularly (i.e. overdue beyond 90 days), the valuation is in accordance with prudential norms for provisioning as prescribed by the RBI. Interest on such securities is not recognised in the Profit and Loss Account until received; Equity shares, for which current quotations are not available or where the shares are not quoted on the stock exchanges, are valued at break-up value (without considering revaluation reserves, if any) which is ascertained from the company s latest Balance Sheet. In case the latest Balance Sheet is not available, the shares are valued at ` 1 per investee company; Units of Venture Capital Funds (VCF) held under AFS category where current quotations are not available are marked to market based on the Net Asset Value (NAV) shown by VCF as per the latest audited financials of the fund. In case the audited financials are not available for a period beyond 18 months, the investments are valued at ` 1 per VCF. Investment in unquoted VCF after 23 rd August, 2006 are categorised under HTM category for the initial period of three years and valued at cost as per RBI guidelines; Security receipts are valued as per the Net Asset Value (NAV) obtained from the issuing Asset Reconstruction Company or Securitisation Company or estimated recovery whichever is lower. h) Non-performing investments are identified and valued based on the RBI guidelines. i) Repurchase and reverse repurchase transactions - Securities sold under agreements to repurchase (Repos) and securities purchased under agreements to resell (Reverse Repos) are accounted as collateralised borrowing and lending transactions respectively. The difference between the consideration amount of the first leg and the second leg of the repo is recognised as interest income or interest expense over the period of the transaction. 2 Advances Classification: Advances are classified as performing and non-performing advances ( NPAs ) based on RBI guidelines and are stated net of bills rediscounted, specific provisions, interest in suspense for non-performing advances and claims received from Export Credit Guarantee Corporation, provisions for funded interest term loan and provisions in lieu of diminution in the fair value of restructured assets. Also, NPAs are classified into sub-standard, doubtful and loss assets as required by RBI guidelines. Interest on NPAs is transferred to an interest suspense account and not recognised in the Profit and Loss Account until received.

19 Actions speak Consolidated Financial Bank Reports and Schedules Amounts paid for acquiring non-performing assets from other banks and NBFCs are considered as advances. Actual collections received on such non-performing assets are compared with the cash flows estimated while purchasing the asset to ascertain overdues. If these overdues are in excess of 90 days, then these assets are classified into sub-standard, doubtful or loss as required by the RBI guidelines on purchase of non-performing assets. The Bank transfers advances through inter-bank participation with and without risk. In accordance with the RBI guidelines, in the case of participation with risk, the aggregate amount of the participation issued by the Bank is reduced from advances and where the Bank is participating, the aggregate amount of the participation is classified under advances. In the case of participation without risk, the aggregate amount of participation issued by the Bank is classified under borrowings and where the Bank is participating, the aggregate amount of participation is shown as due from banks under advances. Provisioning: Provision for NPAs comprising sub-standard, doubtful and loss assets is made in accordance with RBI guidelines. In addition, the Bank considers accelerated specific provisioning that is based on past experience, evaluation of security and other related factors. Specific loan loss provision in respect of non-performing advances are charged to the Profit and Loss Account. Any recoveries made by the Bank in case of NPAs written off are recognised in the Profit and Loss Account. The Bank considers a restructured account as one where the Bank, for economic or legal reasons relating to the borrower s financial difficulty, grants to the borrower concessions that the Bank would not otherwise consider. Restructuring would normally involve modification of terms of the advance / securities, which would generally include, among others, alteration of repayment period / repayable amount / the amount of installments / rate of interest (due to reasons other than competitive reasons). Restructured accounts are classified as such by the Bank only upon approval and implementation of the restructuring package. Necessary provision for diminution in the fair value of a restructured account is made. In accordance with RBI guidelines the Bank has provided general provision on standard assets including credit exposures computed as per the current marked to market values of interest rate and foreign exchange derivative contracts, and gold at levels stipulated by RBI from time to time - farm credit to agricultural activities, individual housing loan and SME at 0.25%, commercial real estate at 1.00%, restructured standard advances at 5%, teaser rate housing loans at 2.00%, commercial real estate-residential housing at 0.75% and for other sectors at 0.40%. Additional 2% standard asset provision is done for overseas stepdown subsidiaries of Indian corporates. Standard provision is also done at higher than the prescribed rates in respect of advances to stressed sectors as per the framework approved by the Board of Directors. Further to provisions required as per the asset classification status, provisions are held for individual country exposure (except for home country) as per the RBI guidelines. Exposure is classified in the seven risk categories as mentioned in the Export Credit Guarantee Corporation of India Limited ( ECGC ) guidelines and provisioning is done for that country if the net funded exposure is one percent or more of the Bank s total assets based on the rates laid down by the RBI. Provision for Unhedged Foreign Currency Exposure of borrowers is made as per the RBI guidelines. 3 Loss on Sale of Advances to Asset Reconstruction Company Loss on sale of Advances sold to Asset Reconstruction Company are recognised immediately in the Profit and Loss Account. 4 Securitisation The Bank enters into arrangements for sale of loans through Special Purpose Vehicles (SPVs). In most cases, post securitisation, the Bank continues to service the loans transferred to the SPV. At times, the Bank also provides credit enhancement in the form of cash collaterals and / or by subordination of cash flows to Senior Pass Through Certificate (PTC) holders. In respect of credit enhancements provided or recourse obligations (projected delinquencies, future servicing etc.) accepted by the Bank, appropriate provision / disclosure is made at the time of sale in accordance with Accounting Standard 29, Provisions, Contingent Liabilities and Contingent Assets. In accordance with the RBI guidelines, the profit or premium on account of securitisation of assets at the time of sale is computed as the difference between the sale consideration and the book value of the securitised asset amortised over the tenure of the securities issued. Loss on account of securitisation on assets is recognised immediately to the Profit and Loss Account. The Bank invests in PTCs of other SPVs which are accounted for at the deal value and are classified under Investments. 5 Fixed assets (Property, Plant & Equipment and Intangible) and depreciation / amortisation Property, Plant & Equipment and Intangible Assets have been stated at cost less accumulated depreciation and amortisation and adjusted for impairment, if any. Cost includes cost of purchase inclusive of freight, duties, incidental expenses and all expenditure like site preparation, installation costs and professional fees incurred on the asset before it is ready to put to use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefit / functioning capability from / of such assets. Gain or losses arising from the retirement or disposal of a Property Plant and Equipment / Intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of assets and recognised as income or expense in the Profit and Loss Account. Profit on sale of premises, if any, is transferred to Capital Reserve as per the RBI guidelines. Annual Report / 203